UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-14377
Krupp Realty Limited Partnership-VII
(Exact name of registrant as specified in its charter)
Massachusetts 4-2842924
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
470 Atlantic Avenue, Boston, Massachusetts 02210
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (617) 423-2233
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of
Investor Limited Partner Interest
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ].
Aggregate market value of voting securities held by non-affiliates: Not
applicable, since securities are non-voting.
Documents incorporated by reference: Part IV, Item 14
The exhibit index is located on pages 9-12.
<PAGE>
PART I
ITEM 1. BUSINESS
Krupp Realty Limited Partnership-VII ("KRLP-VII") was formed on August
21, 1984 by filing a Certificate of Limited Partnership in The
Commonwealth of Massachusetts. KRLP-VII has issued all of the General
Partner Interests to two General Partners, The Krupp Corporation, a
Massachusetts corporation, and The Krupp Company Limited Partnership-II, a
Massachusetts limited partnership. KRLP-VII has also issued all of the
Original Limited Partner Interests to The Krupp Company Limited
Partnership-II. On November 2, 1984, KRLP-VII commenced an offering of up
to 40,000 units of Investor Limited Partner Interest (the "Units") for
$1,000 per Unit. The public offering was closed on April 25, 1986, at
which time 27,184 Units had been sold. For additional details, see Note A
to Consolidated Financial Statements included in Item 8 (Appendix A) of
this report. The primary business of KRLP-VII is to invest in, operate,
refinance and ultimately dispose of a diversified portfolio of residential
and commercial real estate. KRLP-VII considers itself to be engaged only
in the industry segment of investment in real estate.
On December 19, 1984 the General Partners formed Krupp Realty Courtyards
Limited Partnership ("Realty-VII") as a prerequisite for the refinancing
of Courtyards Village East Apartments ("Courtyards"). At the same time,
the General Partners transferred ownership of Courtyards to Realty-VII.
The General Partner of Realty-VII is the Krupp Corporation ("Krupp
Corp."). The Limited Partner of Realty-VII is KRLP-VII. Krupp Corp. has
beneficially assigned its interest in Realty-VII to KRLP-VII.
On March 31, 1994, the General Partners formed Windsor Partners Limited
Partnership ("Windsor L.P.") as a prerequisite for the refinancing of
Windsor Apartments. At the same time, the General Partners transferred
ownership of the property to Windsor L.P.. In exchange for the property,
KRLP-VII received 99% Limited Partnership interest in Windsor L.P.. The
General Partner of Windsor L.P. is ST. Windsor Corporation which has a 1%
interest in Windsor L.P. and is 100% owned by KRLP-VII.
KRLP-VII, Realty-VII and Windsor L.P. are collectively known as Krupp
Realty Limited Partnership-VII and Subsidiaries (collectively referred to
herein as the "Partnership").
The Partnership's real estate investments are subject to some seasonal
fluctuations due to changes in utility consumption and seasonal
maintenance expenditures. However, the future performance of the
Partnership will depend upon factors which cannot be predicted. Such
factors include general economic and real estate market conditions, both
on a national basis and in those areas where the Partnership's real estate
investments are located, the availability and cost of borrowed funds, real
estate tax rates, operating expenses, energy costs, government regulations
and federal and state income tax laws. The requirements for compliance
with federal, state and local regulations to date have not had an adverse
affect on the Partnership's operations, and no adverse affect therefrom is
now anticipated in the future.
The Partnership's investments in real estate are also subject to such
risks as (i) competition from existing and future projects held by other
<PAGE>
owners in the locations of the Partnership's properties, (ii) possible
reduction in rental income due to an inability to maintain high occupancy
levels, to the financial failure of a tenant or the inability of retail
tenants to achieve gross sales at a level sufficient to provide for
additional rental income based on a percentage of sales, (iii) possible
adverse changes in mortgage interest rates, (iv) possible adverse changes
in general economic and local conditions, such as competitive
over-building, increases in unemployment, or adverse changes in real
estate zoning laws, (v) the possible future adoption of rent control
legislation which would not permit the full amount of increased costs to
be passed on to tenants in the form of rent increases, and (vi) other
circumstances over which the Partnership may have little or no control.
As of December 31, 1995, there were approximately 29 full and
part-time on-site personnel employed by the Partnership.
ITEM 2. PROPERTIES
As of December 31, 1995, the Partnership has leveraged
investments in two apartment complexes having an aggregate of 524 units
and one commercial shopping center with 89,432 square feet of leasable
space.
A summary of the Partnership's real estate investments is
presented below.
<TABLE>
<CAPTION>
Total Units/ Average Occupancy
Year Current Leasable December 31,
Description Acquired Square Footage 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
Multi-Family Residential
Courtyards Village East
Apartments
Naperville, Illinois 1985 224 95% 97% 96% 93% 92%
Windsor Apartments
Garland, Texas 1984 300 95% 94% 92% 93% 92%
Shopping Center - Commercial
Nora Corners Shopping
Center
Indianapolis, Indiana 1986 89,432 93% 93% 93% 95% 95%
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the
Partnership is a party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
<PAGE>
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The transfer of Units is subject to certain limitations
contained in the Partnership Agreement. There is no public market for the
Units and it is not anticipated that any such public market will develop.
The number of Investor Limited Partners as of December 31, 1995
was approximately 1,500.
One of the objectives of the Partnership is to generate cash
available for distribution, all or a portion of which will be treated as a
return of capital and therefore not currently taxable. The Partnership
discontinued distributions during 1989 due to insufficient operating cash
flow. In 1994, however, the General Partners determined that there was
sufficient Cash Flow to reinstate distributions. These distributions
commenced in August 1994 and thereafter are to be paid semiannually.
The Partnership made the following distributions to its
Partners during the years ended December 31, 1995 and 1994:
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994
Amount Per Unit Amount Per Unit
Limited Partners:
<S> <C> <C> <C> <C>
Investor Limited Partner
Interest (27,184 Units
outstanding) $543,679 $20.00 $135,920 $5.00
Original Limited Partner 48,327 12,082
General Partners 12,082 3,020
$604,088 $151,022
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial information
regarding the Partnership's financial position and operating results.
This information should be used in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations
and the Consolidated Financial Statements and Notes thereto, which are
included in Items 7 and 8 of this report, respectively.
<PAGE>
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Total revenue $ 4,537,418 $ 4,286,787 $ 4,799,476 $ 5,396,406 $ 5,681,346
Loss before gain on
sale/(loss on
foreclosure) (24,601) (409,938) (789,506) (994,525) (893,791)
Gain on sale/(loss on
foreclosure) - - 843,368 - (1,668,385)
Net income (loss) (24,601) (409,938) 53,862 (994,525) (2,562,176)
Net income (loss)
allocated to:
Investor Limited
Partners:
Income (loss) before
gain on sale/(loss
on foreclosure) (24,355) (405,839) (781,611) (984,580) (884,853)
Per Unit (.90) (14.93) (28.75) (36.22) (32.55)
Gain on sale/(loss
on foreclosure) - - 834,934 - (1,651,701)
Per Unit - - 30.71 - (60.76)
Net income (loss) (24,355) (405,839) 53,323 (984,580) (2,536,554)
Per Unit (.90) (14.93) 1.96 (36.22) (93.31)
General Partners:
Income (loss) before
gain on sale/(loss
on foreclosure) (246) (4,099) 539 (9,945) (8,938)
Gain on sale/(loss
on foreclosure) - - - - (16,684)
Net income (loss) (246) (4,099) 539 (9,945) (25,622)
Total assets $17,592,386 $18,336,983 $18,729,696 $24,239,479 $25,444,546
Long-term obligations $12,563,382 $12,745,312 $ 8,364,761 $17,226,999 $17,484,896
Distributions to:
Investor Limited
Partners 543,679 135,920 - - -
Per Unit 20.00 5.00 - - -
Original Limited
Partner 48,327 12,082 - - -
General Partners 12,082 3,020 - - -
</TABLE>
Operations results for the periods presented are not comparable due to the
following events:
(1) Westbrook Place and Willow Cove Apartments were sold July 1, 1993.
<PAGE>
(2) Richland Mall was foreclosed upon on June 4, 1991.
Prior performance of the Partnership is not necessarily indicative of
future operations.
TEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership's ability to generate cash adequate to meet its needs is
dependent primarily upon the operations of its real estate investments.
Such ability would also be impacted by the future availability of bank
borrowings and the future refinancing and sale of the Partnership's
remaining real estate investments. These sources of liquidity will be
used by the Partnership for payment of expenses related to real estate
operations, capital expenditures, debt service and expenses. Cash Flow,
if any, as calculated under Section 8.2(a) of the Partnership Agreement,
will then be available for distribution to the Partners. In 1994, the
General Partners determined that there was sufficient Cash Flow to
reinstate semi-annual distributions. These distributions commenced in
August 1994 at a rate of $5.00 per Unit and increased in February 1995 to
a rate of $20.00 per Unit.
The Partnership's properties (Courtyards Village, Nora Corners and
Windsor Apartments) have generated increased liquidity due to higher
rental rates in 1995, as compared to 1994. Furthermore, the partnership
has increased availability of funds due to reduced mortgage payments
resulting from the 1994 refinancing of the mortgage notes payable at Nora
Corners and Windsor Apartments.
Cash Flow
Shown below, as required by the Partnership Agreement, is the
calculation of Cash Flow of the Partnership for the year ended December
31, 1995. The General Partners provide certain of the information below
to meet requirements of the Partnership Agreement and because they believe
that it is an appropriate supplemental measure of operating performance.
However, Cash Flow should not be considered by the reader as a substitute
to net income, as an indicator of the Partnership's operating performance
or to cash flows as a measure of liquidity.
<TABLE>
<CAPTION>
Rounded to $1,000
<S> <C>
Net loss for tax purposes $ (86,000)
Items not requiring (requiring) the use of operating
funds:
Tax basis depreciation and amortization 1,346,000
Principal payments on mortgage notes payable (168,000)
Capital improvement expenditures (262,000)
Working capital reserves (226,000)
Cash Flow $ 604,000
</TABLE>
Operations
<PAGE>
The following discussion relates to the operations of the Partnership
and its properties (Courtyards Village, Nora Corners, Westbrook and
Windsor Apartments) for the years ended December 31, 1995, 1994, and 1993
or portion thereof. The sale of Westbrook, effective July 1, 1993,
significantly impacted the comparability of the Partnership's operations.
1995 versus 1994
During 1995 as compared to 1994, cash flow increased 60% due to
increases in rental revenues and reduced operating and interest expense.
Rental revenues increased primarily due to steady rental rate increases
implemented at Courtyards and Windsor in 1994. The Partnership's
commercial property, Nora Corners, is maintaining its high level of
occupancy with the signing of two new tenants in the first quarter of
1994, D.L. Lowry Salon, a hair salon, and Food King, a Chinese food
restaurant, and one new tenant in the second quarter of 1995, After all, a
women's clothing store. In addition, the Accent Shop, a home retail
store, renewed its lease. Interest income increased due to additional
investments in commercial paper yielding higher rates of return.
During 1995 as compared to 1994, overall expenses have decreased. The
decrease in operating expense is primarily due to a reduction in insurance
expense due to a favorable claim history as well as management's efforts
to reduce reimbursable operating costs. Interest expense decreased due to
the refinancing of the mortgage notes payable at Windsor Apartments and
Nora Corners in April and October of 1994, respectively. The new
mortgage note at Windsor has a reduced interest rate of 9.25% per annum
from the previous rate of 10.3% per annum. At Nora Corners, the new
mortgage note has an interest rate of 9% per annum from the previous rate
of 10.5% per annum. Maintenance expense increased due to landscaping,
parking lot and exterior building improvements implemented at Courtyards
and Windsor primarily during the third and fourth quarters of 1995.
General and administrative expenses have increased due to legal and
consulting fees paid for the appraisals of the properties.
In 1996, Courtyards and Windsor are scheduled to have capital
improvement expenditures totaling $312,000 and $340,000, respectively.
The General Partners believe these improvements will improve the
appearance of the properties and allow the properties to remain
competitive in their respective real estate markets.
1994 versus 1993
During 1994, as compared to 1993, cash flow increased primarily due to
increases in operating cash flow and reduced capital expenditures. Rental
revenues increased by $198,000, excluding $714,000 of revenue generated by
Westbrook in 1993. This was primarily due to improved occupancy as well
as increased rental rates at Courtyards and Windsor. Interior and
exterior painting improvements and carpentry renovations, started in 1993
at Courtyards and Windsor, were completed in the first quarter of 1994.
Landscaping and parking lot upgrades were also implemented at Courtyards
in 1993. These improvements allowed the Partnership to obtain rental
increases at both properties. Occupancy at Windsor increased due to the
stabilization of the Dallas economy, with home purchasing leveling off.
As a result, all rental concessions at Windsor were eliminated in the
first quarter of 1994. At Courtyards, rental concessions were reduced as
a result of the improved
<PAGE>
occupancy. The Partnership's commercial property, Nora Corners,
maintained its high occupancy with the signing of two new tenants in the
first quarter of 1994, D.L. Lowry Salon, a hair salon, and Food King, a
Chinese food restaurant.
Property expenses for 1994, as compared to 1993 (excluding Westbrook),
increased by $30,000. The increase was primarily due to higher operating
expenses for the snow removal costs incurred at Courtyards and Nora
Corners as a result of the heavy snow storms during the winter of 1994.
General
In accordance with Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of", which is effective for fiscal years beginning after December
15, 1995, the Partnership has implemented policies and practices for
assessing impairment of its real estate assets.
The investments in properties are carried at cost less accumulated
depreciation unless the General Partners believe there is a significant
impairment in value, in which case a provision to write down investments
in properties to fair value will be charged against income. At this time,
the General Partners do not believe that any assets of the Partnership are
significantly impaired.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Appendix A to this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no directors or executive officers. Information as to
the directors and executive officers of The Krupp Corporation which is a
General Partner of both KRLP-VII and The Krupp Company Limited
Partnership-II, the other General Partner of KRLP-VII, is as follows:
Position with
Name and Age The Krupp Corporation
Douglas Krupp (49) Co-Chairman of the Board
George Krupp (51) Co-Chairman of the Board
Laurence Gerber (39) President
Robert A. Barrows (38) Senior Vice President and
Corporate Controller
Douglas Krupp is Co-Chairman and Co-Founder of The Berkshire Group.
Established in 1969 as the Krupp Companies, this real estate-based firm
expanded over the years within its areas of expertise including investment
program sponsorship, property and asset management, mortgage banking,
<PAGE>
healthcare facility ownership and the management of the Company. Today,
The Berkshire Group is an integrated real estate, mortgage and healthcare
company which is headquartered in Boston with regional offices throughout
the country. A staff of 3,400 are responsible for the more than $4
billion under management for institutional and individual clients. Mr.
Krupp is a graduate of Bryant College. In 1989 he received an honorary
Doctor of Science in Business Administration from this institution and was
elected trustee in 1990. Mr. Krupp is Chairman of the Board and a Director
of Berkshire Realty Company, Inc. (NYSE-BRI). George Krupp is Douglas
Krupp's brother.
George Krupp is the Co-Chairman and Co-Founder of The Berkshire Group.
Established in 1969 as the Krupp Companies, this real estate-based firm
expanded over the years within its areas of expertise including investment
program sponsorship, property and asset management, mortgage banking and
healthcare facility ownership. Today, The Berkshire Group is an
integrated real estate, mortgage and healthcare company which is
headquartered in Boston with regional offices throughout the country. A
staff of 3,400 are responsible for more than $4 billion under management
for institutional and individual clients. Mr. Krupp attended the
University of Pennsylvania and Harvard University. Mr. Krupp also serves
as Chairman of the Board and Trustee of Krupp Government Income Trust and
as Chairman of the Board and Trustee of Krupp Government Income Trust II.
Laurence Gerber is the President and Chief Executive Officer of The
Berkshire Group. Prior to becoming President and Chief Executive Officer
in 1991, Mr. Gerber held various positions with The Berkshire Group which
included overall responsibility at various times for: strategic planning
and product development, real estate acquisitions, corporate finance,
mortgage banking, syndication and marketing. Before joining The Berkshire
Group in 1984, he was a management consultant with Bain & Company, a
national consulting firm headquartered in Boston. Prior to that, he was a
senior tax accountant with Arthur Andersen & Co., an international
accounting and consulting firm. Mr. Gerber has a B.S. degree in Economics
from the University of Pennsylvania, Wharton School and an M.B.A. degree
with high distinction from Harvard Business School. He is a certified
Public Accountant. Mr. Gerber also serves as President and Director of
Berkshire Realty Company, Inc. (NYSE-BRI) and President and Trustee of
Krupp Government Income Trust and President and Trustee of Krupp
Government Income Trust II.
Robert A. Barrows is Senior Vice President and Corporate Controller of
The Berkshire Group. Mr. Barrows has held several positions within The
Berkshire Group since joining the company in 1983 and is currently
responsible for accounting and financial reporting, treasury, tax, payroll
and office administrative activities. Prior to joining The Berkshire
Group, he was an audit supervisor for Coopers & Lybrand L.L.P. in Boston.
He received a B.S. degree from Boston College and is a Certified Public
Accountant.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no directors or executive officers.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1995, no person owned of record or was known by the
<PAGE>
General Partners to own beneficially more than 5% of the Partnership's
27,184 outstanding Units. The only interests held by management or its
affiliates consist of its General Partner and Original Limited Partner
interests.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Partnership does not have any directors, executive officers or
nominees for election as director. Additionally, as of December 31, 1995,
no person of record owned or was known by the General Partners to own
beneficially more than 5% of the Partnership's outstanding Units.
PART IV
ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) 1. Consolidated Financial Statements - see Index to Consolidated
Financial Statements and Consolidated Financial Statement
Schedule included under Item 8, Appendix A, on page F-2 to
this report.
2. Consolidated Financial Statement Schedules - see Index to
Consolidated Financial Statements and Consolidated Financial
Statement Schedule included under Item 8, Appendix A, on page
F-2 to this report. All other schedules are omitted as they
are not applicable or not required or the information is
provided in the Consolidated Financial Statements or the
Notes thereto.
(b) Exhibits:
Number and Description
Under Regulation S-K
The following reflects all applicable exhibits required under
Item 601 of Regulation S-K:
(4) Instruments defining the rights of security holders
including indentures:
(4.1) Amended Agreement of Limited Partnership dated as of
October 23, 1984 [Exhibit A to Prospectus included in
Registrant's Registration Statement on Form S-11 (File
2-92889)].*
(4.2) Thirty-Second Amendment and Restatement of Certificate
of Limited Partnership filed with the Massachusetts
Secretary of State on June 4, 1986 [Exhibit 4.2 to
Registrant's Report on Form 10-K dated October 31,
1986 (File No. 0-14377)].*
(10) Material Contracts
Windsor Apartments
(10.1) Purchase and Sale Agreement dated June 3, 1983
<PAGE>
between Douglas Krupp, on behalf of himself and
others, and Garland Land Joint Venture [Exhibit 1
to Registrant's Report on Form 8-K dated December
27, 1984 (File No. 2-92889)].*
(10.2) Management Agreement dated December 27, 1984
between Krupp Realty Limited Partnership-VII, as
Owner and Krupp Asset Management Company, now
known as Berkshire Property Management ("BPM"), as
Agent. [Exhibit 10.4 to Registrant's Report on
Form 10-K for the fiscal year ended October 31,
1984 (File No. 2-92889)].*
(10.3) Promissory Note dated April 13, 1994 by and
between Windsor Partners Limited Partnership and
Sun Life Insurance Company of America [Exhibit
10.1 to Registrant's Report on Form 10-Q dated
June 30, 1994 (File No. 0-14377)].*
(10.4) Deed of Trust, Security Agreement, Fixture Filing,
Financing Statement and Assignment of Leases and
Rents dated April 13, 1994 from the grantor,
Windsor Partners Limited Partnership, to the
Trustee, Brian C. Rider [Exhibit 10.2 to
Registrant's Report on Form 10-Q dated June 30,
1994 (File No. 0-14377)].*
Courtyards Village East Apartments
(10.5) Purchase and Sale Agreement dated October 12, 1984
between Douglas Krupp on behalf of himself and
others, and The Courtyards Village and The
Courtyards Village Inn-East Apartments Partnership
[Exhibit 1 to Registrant's Report on Form 8-K
dated April 1, 1985 (File 2-92889)].*
(10.6) Amended Trust Agreement dated May 6, 1976 between
The Courtyards Village and The Courtyards Village
Inn-East Apartments Partnership and American
National Bank and Trust Company of Chicago [Exhibit
2 to Registrant's Report on Form 8-K dated April 1,
1985 (File No. 2-92889)].*
(10.7) Assignment of Trust of American National Bank and
Trust Company of Chicago dated April 1, 1985
[Exhibit 3 to Registrant's Report on Form 8-K dated
April 1, 1985 (File No. 2-92889)].*
(10.8) Mortgage Note dated January 1, 1973 between
American National Bank and Trust Company of Chicago
and Republic Realty Mortgage Company [Exhibit 4 to
Registrant's Report on Form 8-K dated April 1, 1985
(File No. 2-92889)].*
(10.9) Modification Agreement dated May 1, 1975 between
American National Bank and Trust Company of Chicago
and Republic Realty Mortgage Corporation. [Exhibit
5 <PAGE>
to Registrant's Report on Form 8-K dated April 1,
1985 (File No. 2-92889)].*
(10.10) Mortgage Note dated May 18, 1976 between American
National Bank and Trust Company of Chicago and
Republic Realty Mortgage Company [Exhibit 6 to
Registrant's Report on Form 8-K dated April 1, 1985
(File No. 2-92889)].*
(10.11) Mortgage Agreement dated May 18, 1976 between
American National Bank and Trust Company of Chicago
and Republic Realty Mortgage Corporation [Exhibit 7
to Registrant's Report on Form 8-K dated April 1,
1985 (File No. 2-92889)].*
(10.12) Amended HUD Regulatory Agreement dated May 18, 1976
between American National Bank and Trust Company of
Chicago and Republic Realty Mortgage Corporation
[Exhibit 8 to Registrant's Report on Form 8-K dated
April 1, 1985 (File No. 2-92889)].*
(10.13) Consolidation Agreement dated June 14, 1976 between
American Bank and Trust Company of Chicago, as
Trustee, and Republic Realty Mortgage Corporation
[Exhibit 9 to Registrant's Report on Form 8-K dated
April 1, 1985 (File No. 2-92889)].*
(10.14) Management Agreement dated April 1, 1985 between
Krupp Realty Limited Partnership-VII, as Owner and
Krupp Asset Management Company, now known as
Berkshire Property Management ("BPM"), as Agent.
{Exhibit 10.20 to Registrant's Report on Form 10-K
for the year ended October 31, 1985 (File No. 2-
92889)].*
Nora Corners Shopping Center
(10.15) Purchase and Sale Agreement dated June 16, 1986
between Douglas Krupp, on behalf of himself and
others and Nora Corners Building Associates, Ltd.,
an Illinois limited partnership [Exhibit 1 to
Registrant's Report on Form 8-K dated September 24,
1986 (File No. 0-14377)].*
(10.16) Amendment to Purchase and Sale Agreement dated
August 29, 1986 between Douglas Krupp, on behalf of
himself and others (assigned to Krupp Realty
Limited Partnership-VII), and Nora Corners Building
Associates, Ltd., an Illinois limited partnership
[Exhibit 2 to Registrant's Report on Form 8-K dated
September 24, 1986 (File No. 0-14377)].*
(10.17) Property Management Agreement dated September 24,
1986 between Krupp Realty Limited Partnership-VII,
as Owner and Krupp Asset Management Company, now
known as Berkshire Property Management ("BPM")
<PAGE>
Berkshire Property Management Company, as Agent
[Exhibit 10.36 to Registrant's Report on Form 10-K
dated October 31, 1987 (File No. 0-14377)].*
(10.18) Special Warranty Deed dated September 24, 1986
between Krupp Realty Limited Partnership-VII and
Nora Corners Building Associates, Ltd., an Illinois
limited partnership [Exhibit 8 to Registrant's
Report on Form 8-K dated September 24, 1986 (File
No. 0-14377)].*
(10.19) Land Lease dated October 11, 1962 between Cornelius
M. and Wilma Brown (lessor) and Burger Chef
Systems, Inc., an Indiana corporation (lessee)
[Exhibit 9 to Registrant's Report on Form 8-K dated
September 24, 1986 (File No. 0-14377)].*
(10.20) Notice of Lease dated September 23, 1963 between
Cornelius M. and Wilma Brown (lessor) and Burger
Chef Systems, Inc., an Indiana corporation (lessee)
[Exhibit 10 to Registrant's Report on Form 8-K
dated September 24, 1986 (File No. 0-14377)].*
(10.21) Assignment of Lease dated September 24, 1986
between Krupp Realty Limited Partnership-VII and
Nora Corners Building Associates, Ltd., an Illinois
limited partnership [Exhibit 11 to Registrant's
Report on Form 8-K dated September 24, 1986 (File
No. 0-14377)].*
(10.22) Promissory Note dated September 27, 1994, effective
October 6, 1994, by and between Krupp Realty
Limited Partnership-VII and John Hancock Mutual
Life Insurance Company. [Exhibit 10.22 to
Registrant's Report on Form 10-K dated December 31,
1994 (File No. 0-14377)].*
(10.23) Mortgage, Security Agreement, Assignment of Leases
and Fixture Filing dated September 27, 1994,
effective October 6, 1994, by and between Krupp
Realty Limited Partnership-VII and John Hancock
Mutual Life Insurance Company. [Exhibit 10.23 to
Registrant's Report on Form 10-K dated December 31,
1994 (File No. 0-14377)].*
* Incorporated by reference
(c) Reports on Form 8-K
During the last quarter of the year ended December 31, 1995, the
Partnership filed no reports on Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on the
21st day of March, 1996.
KRUPP REALTY LIMITED PARTNERSHIP-VII
By: The Krupp Corporation, a General
Partner
By: /s/Douglas Krupp
Douglas Krupp, Co-Chairman (Principal
Executive Officer) and Director of The
Krupp Corporation
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities indicated, on the 21st day of March,
1996.
Signatures Titles
/s/Douglas Krupp Co-Chairman (Principal Executive Officer)
Douglas Krupp and Director of The Krupp Corporation, a General
Partner.
/s/George Krupp Co-Chairman (Principal Executive Officer)
George Krupp and Director of The Krupp Corporation, a General
Partner.
/s/Laurence Gerber President of The Krupp Corporation, a
Laurence Gerber General Partner.
/s/Robert A. Barrows Senior Vice President and Corporate
Robert A. Barrows Controller of The Krupp Corporation,
a General Partner.
<PAGE>
APPENDIX A
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
ITEM 8 OF FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
For the Year Ended December 31, 1995
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Report of Independent Accountants F-3
Consolidated Balance Sheets at December 31, 1995 and 1994 F-4
Consolidated Statements of Operations for the years ended
December 31, 1995, 1994 and 1993 F-5
Consolidated Statements of Changes in Partners' Equity for
the years ended December 31, 1995, 1994 and 1993 F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993 F-7
Notes to Consolidated Financial Statements F-8 - F-15
Schedule III - Real Estate and Accumulated Depreciation F-16 - F-17
All other schedules are omitted as they are not applicable, not required,
or the information is provided in the consolidated financial statements or
the notes thereto.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Krupp Realty Limited Partnership-VII and Subsidiaries:
We have audited the consolidated financial statements and
consolidated financial statement schedule of Krupp Realty Limited
Partnership-VII and subsidiaries (the "Partnership") listed in the index
on page F-2 of this Form 10-K. These consolidated financial statements
and consolidated financial statement schedule are the responsibility of
the Partnership's management. Our responsibility is to express an opinion
on these financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the consolidated
financial position of Krupp Realty Limited Partnership-VII and
Subsidiaries as of December 31, 1995 and 1994 and the results of its
operations and its cash flows for each of the three years in the period
ended December 31, 1995 in conformity with generally accepted accounting
principles. In addition, in our opinion, the consolidated financial
statement schedule referred to above, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly
in all material respects, the information required to be included therein.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
February 1, 1996
<PAGE>
<TABLE>
<CAPTION>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
ASSETS
1995 1994
<S> <C> <C>
Multi-family apartment complexes, net of
accumulated depreciation of $9,521,601 and
$8,664,936, respectively (Note D) $ 9,030,289 $ 9,665,226
Retail center, net of accumulated
depreciation of $3,285,620 and $2,896,863,
respectively (Notes D and H) 6,376,225 6,724,369
Total real estate assets 15,406,514 16,389,595
Cash and cash equivalents 1,311,037 1,021,464
Cash restricted for tenant security deposits 35,979 55,084
Cash restricted for capital improvements (Note D) 57,462 54,189
Prepaid expenses and other assets (Note I) 549,614 555,508
Deferred expenses, net of accumulated
amortization of $55,514 and $19,538,
respectively (Note I) 231,780 261,143
Total assets $17,592,386 $18,336,983
LIABILITIES AND PARTNERS' EQUITY
Mortgage notes payable (Note D) $12,744,191 $12,912,152
Accrued expenses and other liabilities (Note E) 815,041 762,988
Total liabilities 13,559,232 13,675,140
Commitment (Note F)
Partners' equity (Note F):
Investor Limited Partners (27,184
Investor Limited Partner interests
outstanding) 4,606,880 5,174,914
Original Limited Partner (337,462) (289,135)
General Partners (236,264) (223,936)
Total Partners' equity 4,033,154 4,661,843
Total liabilities and Partners' equity $17,592,386 $18,336,983
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Revenue:
Rental (Note G) $4,470,378 $4,258,043 $4,774,332
Interest income 67,040 28,744 25,144
Total revenue 4,537,418 4,286,787 4,799,476
Expenses:
Operating (Notes H and I) 1,036,703 1,161,154 1,491,610
Maintenance 359,058 331,826 497,049
Real estate taxes 437,955 404,887 464,734
Management fees to an affiliate
(Note I) 192,572 176,861 208,563
Depreciation and amortization 1,281,398 1,293,815 1,387,232
Interest (Note D) 1,119,216 1,230,723 1,446,343
General and administrative
(Note I) 135,117 97,459 93,451
Total expenses 4,562,019 4,696,725 5,588,982
Net loss before gain on sale
of Westbrook - - (789,506)
Gain on sale of Westbrook (Note C) - - 843,368
Net income (loss) (Note J): $ (24,601) $ (409,938) $ 53,862
Allocation of net income (loss)
(Note F):
Investor Limited Partner
Interest (27,184 Units outstanding) $ (24,354) $ (405,839) $ 53,323
Per Unit of Investor Limited
Partner Interest:
Loss before gain on sale of
Westbrook $ (.90) $ (14.93) $ (28.75)
Gain on sale of Westbrook - - 30.71
Net income (loss) $ (.90) $ (14.93) $ 1.96
General Partners:
Loss before gain on sale of
Westbrook $ (246) $ (4,099) $ (7,895)
Gain on sale of Westbrook - - 8,434
Net income (loss) $ (246) $ (4,099) $ 539
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Investor Original Total
Limited Limited General Partners'
Partners Partner Partners Equity
<S> <C> <C> <C> <C>
Balance at December 31, 1992 $5,663,350 $(277,053) $(217,356) $5,168,941
Net income 53,323 - 539 53,862
Balance at December 31, 1993 5,716,673 (277,053) (216,817) 5,222,803
Distribution (135,920) (12,082) (3,020) (151,022)
Net loss (405,839) - (4,099) (409,938)
Balance at December 31, 1994 5,174,914 (289,135) (223,936) 4,661,843
Distribution (543,679) (48,327) (12,082) (604,088)
Net loss (24,355) - (246) (24,601)
Balance at December 31, 1995 $4,606,880 $(337,462) $(236,264) $4,033,154
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C> <C>
Operating activities:
Net income (loss) $ (24,601) $ (409,938) $ 53,862
Adjustments to reconcile
net income (loss) to net cash
provided by operating activities:
Gain on sale of Westbrook - - (843,368)
Depreciation and amortization 1,281,398 1,293,815 1,387,232
Decrease in restricted cash
for tenant security deposits 19,105 6,279 21,472
Decrease (increase) in prepaid
expenses and other assets 5,894 (227,646) 67,570
Increase (decrease) in
accrued expenses and other
liabilities 52,053 (61,873) 91,295
Net cash provided by
operating activities 1,333,849 600,637 778,063
Investing activities:
Additions to fixed assets (262,341) (221,949) (333,793)
Decrease (increase) in cash
restricted for capital
improvements (3,273) 3,559 91,925
Proceeds from sale of Westbrook - - 75,000
Net cash used in
investing activities (265,614) (218,390) (166,868)
Financing activities:
Principal payments on mortgage
notes payable (167,961) (145,050) (157,909)
Proceeds from mortgage
notes payable - 9,550,000 -
Repayment of mortgage
notes payable - (9,174,830) -
Increase in deferred expenses (6,613) (280,679) -
Distributions (604,088) (151,022) -
Net cash used in
financing activities (778,662) (201,581) (157,909)
Net increase in cash and cash
equivalents 289,573 180,666 453,286
Cash and cash equivalents,
beginning of year 1,021,464 840,798 387,512
Cash and cash equivalents,
end of year $1,311,037 $1,021,464 $ 840,798
</TABLE>
Supplemental schedule of noncash investing and financing activities:
The Partnership sold Westbrook on July 1, 1993 for net proceeds of $75,000
and retirement of all related debt as shown below:
First mortgage and accrued interest payable $3,799,398
Second mortgage payable 1,600,000
Cash proceeds 75,000
Net book value of property sold (4,631,030)
Gain on sale of Westbrook $ 843,368
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
______________
A. Organization
Krupp Realty Limited Partnership-VII ("KRLP-VII") was formed on August
21, 1984 by filing a Certificate of Limited Partnership in The
Commonwealth of Massachusetts. KRLP-VII terminates on December 31,
2025 unless earlier terminated upon the occurrence of certain events
as set forth in the Partnership Agreement. KRLP-VII has issued all of
the General Partner Interests to two General Partners, The Krupp
Corporation, a Massachusetts corporation, and The Krupp Company
Limited Partnership-II, a Massachusetts limited partnership, in
exchange for capital contributions aggregating $1,000. In addition,
the General Partners were required to make additional capital
contributions of $135,891 which were used to pay organization and
offering costs in excess of 5% of the gross proceeds of the offering.
Except under certain limited circumstances upon termination of KRLP-
VII, the General Partners are not required to make any other
additional capital contributions.
KRLP-VII has also issued all of the Original Limited Partner Interests
to The Krupp Company Limited Partnership-II in exchange for a capital
contribution of $4,000.
On November 2, 1984, KRLP-VII commenced an offering of up to 40,000
units of Investor Limited Partner Interest (the "Units") for $1,000
per Unit. The public offering was closed on April 25, 1986, at which
time 27,184 Units had been sold for $27,184,000.
On December 19, 1984 the General Partners formed Krupp Realty
Courtyards Limited Partnership ("Realty-VII") as a prerequisite for
the refinancing of Courtyards Village East Apartments ("Courtyards").
At the same time, the General Partners transferred ownership of
Courtyards to Realty-VII. The General Partner of Realty-VII is the
Krupp Corporation ("Krupp Corp."). The Limited Partner of Realty-VII
is KRLP-VII. Krupp Corp. has beneficially assigned its interest in
Realty-VII to KRLP-VII.
On March 31, 1994, the General Partners formed Windsor Partners
Limited Partnership ("Windsor L.P.") as a prerequisite for the
refinancing of Windsor Apartments. At the same time, the General
Partners transferred ownership of the property to Windsor L.P. In
exchange for the property, KRLP-VII received 99% Limited Partnership
interest in Windsor L.P.. The General Partner of Windsor L.P. is ST.
Windsor Corporation which has a 1% interest in Windsor L.P. and is
100% owned by KRLP-VII.
KRLP-VII, Realty-VII and Windsor L.P. are collectively known as Krupp
Realty Limited Partnership-VII and Subsidiaries (collectively referred
to herein as the "Partnership").
B. Significant Accounting Policies
The Partnership uses the following accounting policies for financial
reporting purposes, which may differ in certain respects from those
used for federal income tax
<PAGE>
purposes (Note J):
Basis of Presentation
The consolidated financial statements present the consolidated
assets, liabilities and operations of the Partnership. All
intercompany balances and transactions have been eliminated.
Risks and Uncertainties
The Partnership invests its cash primarily in deposits and
money market funds with commercial banks. The Partnership has
not experienced any losses to date on its invested cash.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amount
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amount of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash Equivalents
The Partnership includes all short-term investments with
original maturities of three months or less at the date of
acquisition in cash and cash equivalents. The cash investments
are recorded at cost, which approximates market values.
Rental Revenues
Residential and commercial leases require the payment of base
rent monthly in advance. Rental revenues are recorded on the
accrual basis. Commercial leases generally contain provisions
for additional rent based on a percentage of tenant sales and
other provisions which are also recorded on the accrual basis,
but are billed in arrears.
Depreciation
Depreciation is provided for by the use of the straight-line
method over estimated useful lives of the related assets as
follows:
Buildings and improvements 2 to 39 years
Equipment, furnishings and fixtures 3 to 5 years
Impairment of Long-Lived Assets
In accordance with Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of", which is effective for
fiscal years beginning after December 15, 1995, the Partnership
has implemented policies and practices for assessing impairment
of its real estate assets.
<PAGE>
The investments in properties are carried at cost less
accumulated depreciation unless the General Partners believe
there is a significant impairment in value, in which case a
provision to write down investments in properties to fair value
will be charged against income. At this time, the General
Partners do not believe that any assets of the Partnership are
significantly impaired.
Leasing Commissions
Leasing commissions on commercial properties are deferred and
amortized over the life of the related lease.
Deferred Expenses
Costs incurred to obtain the mortgages on the properties are
being amortized over the term of the mortgage notes using the
straight line method.
Income Taxes
The Partnership is not liable for federal or state income taxes
as the Partnership income or loss is allocated to the Partners
for income tax purposes. In the event that the Partnership's
tax returns are examined by the Internal Revenue Service or
state taxing authority and the examination results in a change
in the Partnership taxable income or loss, such change will be
reported to the Partners.
Reclassifications
Certain prior year balances have been reclassified to conform
with current year consolidated financial statement
presentation.
C. Sale of Westbrook Place/Willow Cove Apartments
On July 13, 1993 and effective July 1, 1993, the Partnership sold
Westbrook to the holder of the non-recourse first mortgage note on
Westbrook, MXM Mortgage Corporation ("MXM"), subject to all mortgage
debt collateralized by these properties. This sale was coincident
with the sales to MXM of five additional properties in partnerships
affiliated with the General Partners of the Partnership for which MXM
was also the mortgage note holder.
The sale was the ultimate resolution to two years of continued
negotiations with MXM on potential refinancing options on the
properties. MXM was unwilling to accept any proposals or negotiate
any favorable terms. MXM alleged that a default existed regarding the
mortgage note and threatened litigation. The General Partners felt
it was in the best interest of the Partnership to negotiate a sale
given the expense of litigation and, more significantly, that the
total debt on Westbrook exceeded the value of the property. This
situation was not expected to improve by 1995 when the MXM mortgage
note was due. Willow Cove adjoins Westbrook and the Partnership
operated these properties as one, therefore, the Partnership included
Willow Cove in the negotiations as Willow Cove would no longer benefit
from the savings allowed by shared <PAGE>
amenities.
The net book value of the properties was $4,631,030 at the date of the
sale which resulted in a gain of $843,368 for financial reporting
purposes.
D. Mortgage Notes Payable
Substantially, all of the properties owned by the Partnership is
pledged as collateral for the mortgage notes payable outstanding at
December 31, 1995 and 1994. Mortgage notes payable consist of the
following:
<TABLE>
<CAPTION>
Annual
Interest
Principal Rate
Property 1995 1994 1995 1994 Maturity Date
Courtyards Village
<S> <C> <C> <C> <C> <C>
East Apartments $ 3,309,098 $ 3,392,345 7% 7% September, 2014
Nora Corners
Shopping Center 4,194,262 4,242,390 9% 9% October, 2004
Windsor Apartments 5,240,831 5,277,417 9.25% 9.25% May, 2001
$12,744,191 $12,912,152
</TABLE>
Courtyards Village East Apartments
The non-recourse mortgage note payable requires equal
monthly installments of $26,506, consisting of principal and
interest. In addition, the Partnership is required to pay a
monthly deposit of $2,000 to an escrow account to be used
for future property replacements and improvements, and a
mortgage insurance premium equal to .5% per annum of the
outstanding principal balance. As of December 31, 1995, the
mortgage provides for prepayment subject to a penalty equal
to 1/8 of 1% of the excess prepaid above 15% of the original
principal amount. The prepayment percentage shall decrease
by 1/8 of 1% annually each year on December 1st. After
December 1, 1996, the mortgage may be prepaid without
penalty. Under the terms of the loan, HUD restricts the
distribution of funds to Surplus Cash, as defined by HUD in
the regulatory agreement.
Based on the borrowing rates currently available to the
Partnership for bank loans with similar terms and average
maturities, the fair value of long-term debt is
approximately $3,000,000.
Nora Corners Shopping Center
On October 6, 1994, the Partnership refinanced Nora Corners
mortgage note for $4,250,000. The non-recourse mortgage note
is payable, based on a 25-year amortization, in equal monthly
installments of $35,666, consisting of principal and interest.
<PAGE>
At maturity, all unpaid principal (approximately $3,526,000)
and any accrued interest is due. After October 1, 1998, the
note may be prepaid subject to a prepayment penalty. The
Partnership paid refinancing costs of $123,175.
Based on the borrowing rates currently available to the
Partnership for bank loans with similar terms and average
maturities, the fair value of long-term debt is approximately
$4,400,000.
Windsor Apartments
On April 13, 1994, the Partnership refinanced Windsor
Apartments mortgage note for $5,300,000. The non-recourse
mortgage note is payable, based on a 30-year amortization, in
equal monthly installments of $43,602, consisting of principal
and interest. At maturity, all unpaid principal (approximately
$5,021,000) and any accrued interest is due. After October 13,
1997, the note may be prepaid subject to a prepayment penalty.
The Partnership paid refinancing costs of $164,115.
Based on the borrowing rates currently available to the
Partnership for bank loans with similar terms and average
maturities, the fair value of long-term debt is approximately
$5,500,000.
The aggregate principal amounts of borrowings due during the five
years ending December 31, 2000 are $180,809, $195,968, $212,423,
$230,284 and $249,674.
The Partnership paid interest on its borrowings in the amounts of
$1,101,325, $1,210,975 and $1,366,046 during the years ended December
31, 1995, 1994 and 1993, respectively.
E. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following at
December 31, 1995 and 1994:
1995 1994
Accrued real estate taxes $419,964 $392,338
Other liabilities 262,456 257,155
Tenant security deposits 84,091 88,303
Accounts payable 48,530 25,192
$815,041 $762,988
F. Partners' Equity
Under the terms of the Partnership Agreement, losses from operations
are allocated 99% to the Investor Limited Partners and 1% to the
General Partners and profits from operations are allocated 90% to the
Investor Limited Partners, 8% to the Original Limited Partner and 2%
to the General Partners until such time that the Investor Limited
Partners have received a return of their total invested capital plus a
9% per annum
<PAGE>
cumulative return thereon and thereafter, 69% to the Investor Limited
Partners, 25% to the Original Limited Partner and 6% to the General
Partners.
Under the terms of the Partnership Agreement, cash distributions are
generally made on the same basis as the allocations of profits
described above. Distributions from a sale, exchange, refinancing, or
other disposition of a property or upon the termination of the
Partnership are to be allocated differently than that described above
and will be made in part after payment by the Partnership of a certain
subordinated financial consulting fee as described below.
The Partnership entered into a sales agent agreement for the public
offering of Units. Under that Agreement, the Partnership was required
to pay to the sales agent underwriting commissions and related
financial consulting fees equal to 9% of the gross proceeds from the
offering. In addition, the sales agent will be entitled to receive,
over the life of the Partnership, a subordinated financial consulting
fee based upon the net cash proceeds received by the Partnership as a
result of sales and refinancings of Partnership properties, which fee
shall be in an amount not exceeding 1.5% of the gross proceeds of the
offering of Units. No such fees will, however, be payable unless and
until all Partners have received their Invested Capital and the
Investor Limited Partners have received a 9% per annum cumulative
return.
As of December 31, 1995, the following cumulative partner
contributions and allocations have been made since the inception of
the Partnership:
<TABLE>
<CAPTION>
Investor Original Total
Limited Limited General Partners'
Partners Partner Partners Equity
<S> <C> <C> <C> <C> <C>
Capital contributions $ 27,184,000 $ 4,000 $ 136,891 $ 27,324,891
Syndication costs (3,697,375) - (135,891) (3,833,266)
Cash distributions (3,841,456) (341,462) (85,363) (4,268,281)
Net loss from Capital
Transactions (816,767) - (8,250) (825,017)
Net loss from
operations (14,221,522) - (143,651) (14,365,173)
Total $ 4,606,880 $(337,462) $(236,264) $ 4,033,154
</TABLE>
G. Future Base Rents Due Under Commercial Operating Leases
Future base rents due under non-cancelable commercial operating leases
in the five years 1996 through 2000 and thereafter are as follows:
1996 $ 840,500
1997 754,300
1998 688,700
1999 592,500
2000 485,900
Thereafter 1,618,600
<PAGE>
H. Leases
Nora Corners is situated on 11.21 acres. Seven acres are owned by
certain parties having no affiliation with the Partnership and are
leased to the Partnership subject to a 99-year land lease which
expires in 2061. The land lease requires annual rental payments of
$17,280 from 1987 through 2012, $20,180 from 2012 through 2037, and
$23,040 from 2037 through 2061. Under the terms of the land lease,
the lessee may assign its rights to a subsequent purchaser of the
property. Total rental expense related to the land lease charged to
operations for each of the years ended December 31, 1995, 1994 and
1993 was $17,280.
I. Related Party Transactions
Commencing with the date of acquisition of the Partnership's
properties, the Partnership entered into agreements under which
property management fees are paid to an affiliate of the General
Partners for services as management agent. Such agreements provide
for management fees payable monthly at a rate of 4% of the gross
receipts, net of leasing commissions from commercial properties under
management and 5% of the gross receipts from residential properties
under management. The Partnership also reimburses affiliates of the
General Partners for certain expenses incurred in connection with the
operation of the Partnership and its properties including accounting,
computer, insurance, travel, legal and payroll, and with the
preparation and mailing of reports and other communications to the
Limited Partners.
Amounts accrued or paid to the General Partners or their affiliates
during the years ended December 31, 1995, 1994 and 1993 were as
follows:
1995 1994 1993
Management fees $192,572 $176,871 $208,563
Expense reimbursements 129,445 209,994 254,221
Charged to operations $322,017 $386,865 $462,784
In addition to the amounts above, the following amounts relating to
refinancing and disposition activities were paid to the General
Partners or their affiliates:
1995 1994 1993
Cost reimbursements $ 3,793 $ 45,814 $ 7,568
J. Federal Income Taxes
For federal income tax purposes, the Partnership is depreciating
property using the Accelerated Cost Recovery System ("ACRS") and the
modified accelerated cost recovery system ("MACRS") depending on which
is applicable.
The reconciliation of the net income (loss) reported in the accompanying
Consolidated Statement of Operations with the net loss reported in the
Partnership's federal income tax return for the years ended December 31,
1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
Net income (loss) per
<PAGE>
Consolidated Statement of
<S> <C> <C> <C>
Operations $(24,601) $(409,938) $ 53,862
Add: Difference in book
to tax depreciation
and amortization (64,375) (73,351) (124,093)
Difference in book to
to tax gain on sale
of Westbrook - - (95,626)
Less: Rental adjustment
required by Generally
Accepted Accounting
Principles 3,467 3,344 (21,494)
Net loss for federal
income tax purposes $(85,509) $(479,945) $(187,351)
</TABLE>
The allocation of the net loss for federal income tax purposes
for the year ended December 31, 1995 is as follows:
<TABLE>
<CAPTION>
Portfolio Passive
Income Loss Total
<S> <C> <C> <C> <C> <C>
General Partners $ 670 $ (1,526) $ (856)
Original Limited Partner - - -
Investor Limited Partners 66,370 (151,023) (84,653)
$67,040 $(152,549) $(85,509)
For the years ended December 31, 1995, 1994 and 1993, the per Unit net
loss to the Investor Limited Partners for federal income tax purposes
was $3.11, $17.48 and $6.82, respectively.
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1995
</TABLE>
<TABLE>
<CAPTION>
Costs
Capitalized
Subsequent to
Initial Cost to Partnership Acquisition
Buildings & Buildings & Depreciable
Description Encumbrances Land Improvements Improvements Life
<S> <C> <C> <C> <C> <C> <C>
Courtyards
Village East
Apartments
Naperville,
Illinois $ 3,309,098 $ 487,529 $ 6,486,198 $1,179,522 3 to 25 Years
Nora Corners
Shopping Center
Indianapolis,
Indiana 4,194,262 775,345 8,240,342 646,158 2 to 39 Years
Windsor
Apartments
Garland,
Texas 5,240,831 696,362 9,251,669 450,610 3 to 25 Years
Total $12,744,191 $1,959,236 $23,978,209 $2,276,290
</TABLE>
<TABLE>
<CAPTION>
Gross Amounts Carried at
End of Year
Buildings Year
and Accumulated Construction Date
Description Land Improvements Total Depreciation Completed Acquired
<S> <C> <C> <C> <C> <C> <C>
Courtyards
Village East
Apartments
Naperville,
Illinois $ 487,529 $ 7,665,720 $ 8,153,249 $ 4,206,015 1973 4/1/85
Nora Corners
Shopping Center
Indianapolis,
Indiana 775,345 8,886,500 9,661,845 3,285,620 1985 9/24/86
Windsor
Apartments
Garland,
Texas 696,362 9,702,279 10,398,641 5,315,586 1984 12/27/84
Total $1,959,236 $26,254,499 $28,213,735 $12,807,221
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
(Continued)
December 31, 1995
Reconciliation of Real Estate and Accumulated Depreciation for each of
the three years in the period ended December 31, 1995:
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
Real Estate
<S> <C> <C> <C>
Balance at beginning of year $27,951,394 $27,729,445 $35,690,227
Acquisition and improvements 262,341 221,949 333,791
Sales, foreclosure and
retirements - - (8,294,573)
Balance at end of year $28,213,735 $27,951,394 $27,729,445
1995 1994 1993
Accumulated Depreciation
Balance at beginning of year $11,561,799 $10,333,495 $12,646,631
Depreciation expense 1,245,422 1,228,304 1,336,628
Sales, foreclosure and
retirements - - (3,649,764)
Balance at end of year $12,807,221 $11,561,799 $10,333,495
</TABLE>
The Partnership uses the cost basis for property valuation for both income
tax and financial statement purposes. The aggregate cost of the
Partnership's real estate for federal income tax purposes is $28,189,197
and the aggregate accumulated depreciation for federal income tax purposes
is $16,943,630.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Fund VII
Financial Statements for the year ended December 31, 1995 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,404,478
<SECURITIES> 0
<RECEIVABLES> 156,770
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 392,844
<PP&E> 28,501,029<F1>
<DEPRECIATION> 12,862,735<F2>
<TOTAL-ASSETS> 17,592,386
<CURRENT-LIABILITIES> 815,041
<BONDS> 12,744,191<F3>
<COMMON> 4,033,154<F4>
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 17,592,386
<SALES> 4,537,418
<TOTAL-REVENUES> 4,537,418
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,442,803<F5>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,119,216
<INCOME-PRETAX> (24,601)
<INCOME-TAX> 0
<INCOME-CONTINUING> (24,601)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24,601)<F6>
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Includes apartment complexes of $18,551,890, retail center of $9,661,845 and
deferred expenses of $287,294.
<F2>Includes depreciation of $12,807,221 and amortization of deferred expenses of
$55,514.
<F3>Represents mortgage notes payable.
<F4>Represents total equity of general and limited partners of ($236,264) and
$4,269,418, respectively.
<F5>Includes operating expenses of $1,723,450, real estate tax expense $437,955 and
depreciation and amortization $1,281,398.
<F6>Net loss allocated (246) to the General Partners and (24,355) to Limited
Partners for the year ended 12/31/95. Average net income per unit of Limited
Partner interest is (.90) on 27,184 units outstanding.
</FN>
</TABLE>
